Sensex zooms 360 points on macro hopes

Posts biggest gain in more than two months, but could take a breather as economic data disappoint

India's benchmark indices on Tuesday posted their biggest single-day gain is over two months on the back of heavy buying in blue-chip companies such as Tata Motors and HDFC. The Sensex rose 361.53 points, or 1.42 per cent, to close at 25,880.77, while the 50-share NSE Nifty ended at 7,727.05, up 101.1 points, or 1.33 per cent.

The market, however, is likely to give up some gains on Wednesday as the inflation and industrial production data - on which it was pinning hopes - disappointed.

"The macro data are bad news to the extent that the market was expecting an improvement in the industrial production and inflation numbers. The market might take a breather as the turnaround it was expecting hasn't reflected in the numbers," said U R Bhat, managing director, Dalton Capital Advisors.

"The combination that the market was expecting, of slowing inflation and a pick-up in growth hasn't arrived. It is likely there could be a short-term reaction. The market has been running on hope for a long time. Part of it is due to the global liquidity situation. It will be important to see how the liquidity situation pans out," said Dhananjay Sinha, economist and strategist at Emkay Global Financial Services.

Foreign institutional investors (FIIs), who were seen pulling out money in the last two trading sessions, net bought shares worth Rs 370 crore on Tuesday, exchange data showed. The gains on Tuesday were led by Tata Motors, which rose 6 per cent after its June quarter net profit exceeded Street expectations. HDFC and HDFC Bank also gained 5 per cent and 1.8 per cent respectively on expectations that the two stocks might gain weight in a rebalancing exercise by global index provider MSCI.

Analysts said companies in the real estate, infrastructure and capital goods sector might see selling pressure, while technology, consumer goods and pharma stocks might find favour on Wednesday.

"Though we have witnessed a decent recovery in the Nifty in the last two sessions yet only selective index majors participated in the run. Overall, it's not a healthy sign for the markets, so one should maintain a cautious view at the current levels and keep the trading positions hedged," said Jayant Manglik, president-retail distribution, Religare Securities.

Some experts believe that even though the macro data might not reflect it yet the sentiment has improved. "There is no denying that the mood is upbeat. Business confidence has returned but it isn't reflecting in investments yet. It is just a matter of another couple of months," said Bhat.